Suppose Antonio would like to invest $2,000 of his savings.
One way of investing is to purchase stock or bonds from a private company. Suppose NanoSpeck, a biotechnology firm, is selling bonds to raise money for a new lab-a practice known as debt finance. Buying a bond issued by NanoSpeck would give Antonioan IOU, or promise to pay, from the firm. In the event that NanoSpeck runs into financial difficulty,Antonio and the other bond holders will be paid first.
1. Suppose instead Antonio decides to buy 100 shares of NanoSpeck stock. Which of the following statements are correct? Check all that apply.
A. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase NanoSpeck stock.
B. Expectations of a recession that will reduce economy-wide corporate profits will likely cause the value of Antonio's shares to decline.
C.An increase in the perceived profitability of NanoSpeck will likely cause the value of Antonio's shares to rise.
2. Alternatively, Antonio could invest by purchasing bonds issued by the U.S. government. Assuming that everything else is equal, a U.S. government bond that matures 30 years from now most likely pays a interest rate(higher,lower) than a U.S. government bond that matures 10 years from now.